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Nestlé’s Q3 results show Maggi recall

impact far higher than estimates"#e res$%ts for t#e !e&tem'er ($arter of )est%* ndia Ltd s#o+ t#e Mai reca%% #as %eft t#e

com&any far more 'attered t#an most ana%ysts #ad t#o$#t. O&eratin &rofit near%y #a%-ed,

+#ic# means t#e im&act on &rofit is o-er Rs.1,000 crore on an ann$a%ied 'asis. )est%* ndia

#ad re&orted an o&eratin &rofit of Rs.2,130 crore in 201/.

n t#e !e&tem'er ($arter, t#e com&any re&orted a 32.1 yearonyear dro& in re-en$e and a

/7./ dro& in o&eratin &rofit. n com&arison, ana%ysts at t#e to& fi-e instit$tiona% 'roeraefirms #ad estimated a far %o+er 16. dro& in re-en$e and a 20 dro& in o&eratin &rofit.

Here4s t#e n$': sa%es of )est%* ndia4s ot#er &rod$cts are a%so dec%inin.

!a%es of mi% &rod$cts, infant foods, c#oco%ates and 'e-eraes #a-e dec%ined a&&roimate%y

yearonyear, Mint 4s ca%c$%ations s#o+. Most ana%ysts #ad e&ected sa%es of t#ese ot#er

 &rod$ct cateories to ro+ 'et+een and 12 from yearao %e-e%s. "#e ca%c$%ations are

 'ased on t#e ass$m&tion t#at Mai nood%es acco$nted for a ($arter of re-en$es in %ast year4s

!e&tem'er ($arter, in %ine +it# its contri'$tion for t#e f$%% year. "#e com&any to%d ana%ysts att#e end of $%y t#at sa%es of Mai nood%es amo$nted toRs.2,500 crore, or aro$nd a fo$rt# of

its 201/ re-en$es.

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8%ic #ere for en%are

n-estors s#o$%d +orry. 9e-en$es and o&eratin &rofit are 1 and 3/, res&ecti-e%y, %o+er

t#an a-erae estimates of ana%ysts at ota nstit$tiona% ;($ities, <an of America Merri%%Lync#, <arc%ays, =e$tsc#e <an and )om$ra. <$t as one ana%yst at an instit$tiona% 'roerae

firm &oints o$t, %ie its ot#er m$%tinationa% co$nter&arts, )est%* ndia s#ares are >"ef%on

coated?, and it remains to 'e seen if in-estors +i%% react to t#e s#ar&ert#ane&ected fa%% in

 &rofit.

"o 'e s$re, e-er since t#e Mai contro-ersy started, )est%* ndia4s s#ares #a-e

$nder&erformed t#e 'road marets 'y on%y a'o$t . !#ares of m$%tinationa% cons$mer

oods firms en@oy ric# -a%$ations in ndia, &res$ma'%y 'eca$se of t#eir enero$s di-idendsand steady ro+t#. <$t -a%$ations are o$t of +#ac. 8o%atea%mo%i-e BndiaC Ltd and

Hind$stan Dni%e-er Ltd trade at aro$nd /0 times estimated earnins for t#e year ti%% Marc#

2016. )est%* ndia ets an e-en #i#er -a%$ation of o-er 50 times estimated earnins. Eit#

estimates no+ set to 'e c$t, its s#ares s#o$%d fa%% s#ar&%y +#en tradin res$mes on Friday.

<$t t#en, san$ine in-estors may tae comfort in t#e fact t#at Mai sa%es are e&ected to

res$me soon and t#ins may not contin$e to 'e as 'ad as t#ey +ere %ast ($arter. "#ey s#o$%d

+orry, #o+e-er, a'o$t t#e dro& in sa%es of ot#er cateories, and t#e s#ar& fa%% in &rofits. !ome

of t#e dec%ine may 'e on acco$nt of some &rice c$ts t#e com&any too in some cateories

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s$c# as mi% in t#e %ast ($arter. <$t if t#e F!!A BFood !afety and !tandards A$t#ority of

ndiaC misad-ent$re +it# Mai nood%es is %eadin to tr$st iss$es in ot#er &rod$ct cateories,

t#en )est%* ndia may #a-e an e-en 'ier &ro'%em t#an +#at t#e !e&tem'er res$%ts con-ey.

n-estors can on%y #o&e t#is is not tr$e.

Nestlé India slips into loss after Maggi

noodle banHigh quality global journalism requires investment. Please share this article withothers using the link below, do not cut & paste the article. Seeour Ts&s and opyright Policy !or more detail. "mail !tsales.support#!t.com to buyadditional rights. http$%%www.!t.com%cms%s%%c'()d!*'+')+--e+bdbb+ecbae-(.html/i011q2*13)45

6estl7 3ndia, the local division o! the Swiss consumer !oods company, slipped into aloss !or its second quarter a!ter being battered by a national ban on its popular 8aggi

noodles due to sa!ety concerns.3n a statement to the 9ombay Stock "0change on :ednesday, 6estl7 3ndia reporteda net loss o! ;s'**m <=-m> in the three months ending in ?une, compared with a;s2.@bn pro!it during the same period last year.

High quality global journalism requires investment. Please share this article withothers using the link below, do not cut & paste the article. Seeour Ts&s and opyright Policy !or more detail. "mail !tsales.support#!t.com to buyadditional rights. http$%%www.!t.com%cms%s%%c'()d!*'+')+--e+bdbb+ecbae-(.html/i011q2'*dA

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The company said sales had dropped 2 per cent year on year because o! the8aggi noodle scandal, which erupted last month when 3ndian !ood regulators saidthey had !ound dangerously high levels o! lead in several samples. They said thenoodles were Bunsa!e and ha1ardous !or human consumptionC.6estl7, which has disputed the test results and insists its noodles are sa!e, was

ordered by the Dood Sa!ety and Standards Authority o! 3ndia to suspend all sales o!8aggi noodles E one o! the most popular products in its 3ndian port!olio with a nearcult !ollowing among young, time+pressed 3ndians.6estl7 was also ordered to recall and destroy all e0isting 8aggi noodle stocks E amassive logistical e0ercise involving about m packets o! noodles that thecompany has estimated cost it ;s*.bn during the quarter."tienne 9enet stepped down as the companyFs managing director last week, pavingthe way !or 3ndian+born 6estl7 veteran Suresh 6arayanan to take charge and steerthe e!!ort to return 8aggi noodles to shelves. The product dominated the market with( per cent o! instant noodle sales.BThis quarter has been e0tremely challenging !or the company,C 8r 6arayanan.

B6estl7 3ndia is making all e!!orts and will continue to engage with authorities to bring8aggi noodles back on the shelves.C6estl7 has petitioned the 8umbai High ourt in a challenge to the national ban, andoral arguments are e0pected to conclude on Thursday.Goubts over the reliability o! the 3ndian governmentFs test results E and thenecessity o! the ban E have been !uelled by the !indings o! !ood sa!ety watchdogs indeveloped countries including Singapore, the 4, anada, Australia and 6ewIealand that the noodles posed no threat to human health.Since the crisis erupted in 3ndia, !ood sa!ety authorities in all these countries havetested made+in+3ndia 8aggi noodle samples, !ound that the lead levels were belowpermissible limits, and allowed their sale to continue.